The Effects of Tax Reform on the Affordable Care Act: An Attempt at Death by a Thousand Cuts

Posted by on December 22, 2017
ACA, Affordable Care Act

The sweeping Republican tax reform bill, H.R. 1 (115), was passed by Congress on Wednesday afternoon, and signed by President Trump today. Although the President said on Wednesday that, “ObamaCare has been repealed in this bill,” due to the bill’s elimination of the Individual Mandate, it remains to be seen whether this will truly strike the final blow to ObamaCare (the Affordable Care Act, or “ACA”) as envisioned by the President.

If the ACA manages to survive, it will not be for lack of trying on the Trump administration’s part. On top of the elimination of the Individual Mandate, the Trump administration has removed some subsidies, halved the insurance enrollment period, destroyed the Obamacare marketing campaign, and has permitted skimpy new health plans that will inflict even more damage on the ACA. All together, these add up to an incremental corrosion of the law.

However, although the ACA is weakened, it has so far survived the assault, even if in a diminished form. In fact, numerous polls have found that the ACA is increasingly popular with the American public. And several factors indicate that the ACA may be able to weather the storm.

First: the ACA has not been repealed, and the Individual Mandate, which requires most Americans to carry a minimum level of health coverage, is still in effect for 2018.

Second: Even in 2019, when the individual mandate repeal goes into effect, the core essentials of the ACA (individual insurance markets, federal subsidies that help Americans pay insurance premiums, protections for pre-existing conditions, and Medicaid expansion in those states that implemented it), will all still be in effect.

Third: Although the CBO predicts that insurance premiums in the market will spike 10% without the individual mandate, this will not affect most marketplace enrollees, because an increase in federal subsidies will make up for higher premiums. However, those who earn more than 400% of the Federal Poverty Level (about $48,000 for an individual or $98,000 for a family of four) will have to face the brunt of premium increases.

Finally, although the CBO estimates that the loss of the Individual Mandate will cause 13 million fewer people to be insured a decade from now, there is significant debate as to whether it will wreak such significant havoc, as the individual mandate didn’t impose a big enough financial penalty to compel healthy individuals who truly didn’t want to enroll in a health plan to actually enroll in a marketplace health plan. Essentially, the tax penalties of the Individual Mandate were low enough that those who wanted health insurance anyway enrolled in a marketplace plan, while those who didn’t simply took the tax penalty.

Only time will tell if the repeal of the Individual Mandate will have its desired effect. But the ACA is still here, for now, giving many hope that it can be fixed going forward.

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